2016 (1) TMI 392 - AT - Service Tax

Nature of sales incentive received from Mahindra & Mahindra Ltd. - Business Auxiliary Service (BAS) or in the nature of part of sales activity - Extended period of limitation - Held that - it is not in dispute that whatever amount was received by the appellant was passed on the customers as incentive. Indeed the Commissioner (Appeals) recorded the fact that the entire component of sales incentive received had been passed on to the customers. Further, the respondent s appeal was allowed by the Commissioner (Appeals) on the ground of time bar also observing that the facts were in the knowledge of the Department by 05.12.2006 - Appeal of the revenue dismissed - Decided against the revenue.

Summary

Issues:
1. Service tax demand on sales incentives under Business Auxiliary Service (BAS).
2. Interpretation of taxability of sales incentives passed on to customers.
3. Time bar for the appeal.

Analysis:
1. The appeal was filed by Revenue against the Order-in-Appeal that set aside the Order-in-Original confirming a service tax demand of Rs. 3,58,199 for the period July 2004 to September 2005 under BAS, related to sales incentives received from Mahindra & Mahindra Ltd. The Commissioner (Appeals) concluded that since the incentives were passed on to customers and were in the nature of promoting sales of cars on which sales tax was paid, service tax was not leviable. This decision was supported by the case of M/s. ASL Motors Pvt. Ltd.

2. Revenue contended that the sales incentives were not added to the value of goods for sales tax/VAT purposes, thus challenging the Commissioner's conclusion. However, it was established that the entire amount of sales incentives received was indeed passed on to customers. The CESTAT referred to previous judgments where similar activities by automobile dealers were not considered as part of BAS, supporting the decision that the incentives were not subject to service tax.

3. The appeal was also allowed on the ground of time bar, as the facts were known to the Department by a certain date. The CESTAT found no merit in Revenue's appeal, citing precedents and the fact that the incentives were passed on to customers, leading to the rejection of the appeal.

In conclusion, the judgment upheld the decision that service tax was not applicable on the sales incentives passed on to customers, based on the nature of the incentives and the tax already paid by customers. The appeal was rejected, considering both the taxability aspect and the time bar issue.